Publication Date 04/01/2011
Source: Dow Jones News Service
WSJ (4/1) Skanska Pays Big Settlement
(From THE WALL STREET JOURNAL)
Skanska AB, the construction giant working on some of New York's largest public works projects, will pay a $19.6 million settlement after being investigated for circumventing rules designed to encourage the hiring of minority- and women-owned businesses.
Prosecutors also brought fraud charges against the two men who allegedly ran a shell company, Environmental Energy Associates Inc., that Skanska allegedly used to meet requirements for hiring such businesses.
Skanska didn't admit to any wrongdoing in signing the non-prosecution agreement, but the president of its American civil division said in a statement that "we recognize, and regret, that we did not follow best practices with respect to our use of EEA."
Thursday's settlement is the second such deal in five months New York prosecutors have struck with a big construction company relating to minority- and women-owned contractors. Schiavone Construction Co. agreed to pay $20 million to resolve an investigation into its hiring of such firms.
Agencies that get federal money are required to set goals for the participation of minority- and women-owned businesses. Contractors have to make a "good faith effort" to meet those goals. But often, officials said, those goals go unmet or shell companies are set up to give the appearance that a business owned by a minority or a woman is doing the work.
Skanska hired EEA as a subcontractor in 2005 to do $5.2 million worth of concrete and demolition work on the Fulton Street Transit Center, a big Metropolitan Transportation Authority project that will eventually provide underground connections between a host of subway lines. Hiring EEA helped Skanska fulfill a requirement that minority- or women-owned contractors get 10% of the work on the project.
But EEA didn't do any real work, according to the indictment. Instead, Skanska transferred three of its foremen and a crew of workers to the smaller firm's payroll. It also let those workers use its equipment, because EEA didn't have any, prosecutors say. Skanska then transferred money to the smaller company to pay the workers. Then, in reports to the MTA, the firms lied about the arrangement, prosecutors say.
In addition to paying the settlement. Skanska agreed to beef up its oversight of subcontracting to minority- and women-owned businesses.
Different contractors had similar arrangements with EEA on other projects, prosecutors say, including the construction of a transit hub at the World Trade Center site and a new terminal for JetBlue Airways at John F. Kennedy International Airport.
EEA was run by Balu Kamat and Carmine Desio, according to prosecutors. Each faces charges of conspiracy to commit mail and wire fraud and mail fraud. They both pleaded not guilty in an appearance in Southern District court in Monhattan Thursday. The two men face a maximum of 40 years in prison.